Oversight: Unlike Katrina, TARP has an IPSIG
When 9-11 happened, New York City let out a bunch of no-bid emergency contracts to work on "the pile" at Ground Zero. The Commissioner of the NYC Department of Investigations, the late and great Ed Kurianksy, went to then Mayor Giuliani and insisted that since there was great chaos and confusion at Ground zero and money was just being thrown at the problem, there would be a huge opportunity for waste, fraud, and abuse. He demanded that each of the four prime contractors at Ground Zero take on an Independent Private Sector Inspector General (IPSIG), and the Mayor agreed.
Although it later turned out that there was some fraud at the level of second-, third-, and fourth-tier subcontractors (who did not have IPSISGs), the work of the prime contractors was closely monitored and abuses nipped in the bud and corrected. Many in the law enforcement and IG community thought that this would become a model for disaster relief.
So, when Katrina hit, some people from prominent IPSIG firms went to see Mike Chertoff over at Homeland Secuirty and said basically the same thing to him that Kuriansky has said to Giuliani–that since money will just be thrown at this problem, there is great potential for waste, fraud, and abuse. Chertoff told them that decisions about such things were going to be made by a lawyer in the Department, and sent them to go see that lawyer. He was Dick Cheney’s son-in-law. It should be no surprise to you that no IPSIGs were assigned to Katrina relief, and, as we all later learned, waste, fraud, and abuse was rampant, and ran to the billions of dollars.
When the financial crisis struck in the waning days of the Bush Administration (remember our economy suffered its heart attack in September and October of 2008, before Obama had even won the presidency), Hank Paulson proposed one as hoc, "throw money at the problem" proposal after another. Congress got ansty, thought that there might be a repeat of the Katrina misspent billions, and required the appointment of a Special Inspector General for TARP funds.
Thank goodness they did that. SIG TARP Neil Barofsky released a report this week which warns:
"The significant Government-financed leverage presents a great incentive for collusion between the buyer and seller of the asset, or the buyer and other buyers, whereby, once again, the taxpayer takes a significant loss while others profit," the office said in its quarterly report to Congress.
The Treasury should impose conflict-of-interest rules on firms participating in the program and disclose information about its beneficiaries, the report said.
I realize that identifying the possibility of collusion and calling for rulemaking is only a first step, but at least it is a first step.
Plus, he’s got 20 criminal fraud investigations open. Busy guy.
He’s not only looking back at past actions (as you do in all criminal cases, even those involving torture), he prospectively criticizing dumb moves before they happen:
The inspector general’s office said the Treasury should abolish its plan to have credit-ratings firms determine the quality of loans, and instead screen each residential mortgage-backed security it takes as collateral.
"Arguably, the wholesale failure of the credit-rating agencies to rate adequately such securities is at the heart of the securitization market collapse, if not the primary cause of the current credit crisis," the report said.
My thoughts exactly. Others may disagree, and feel free to educate me in the comments. . . .
I have no clue if this Barofsky guy is going to succeed, but he at least seems to "get it," to have a clue about what to look for.
By the way, he has a whistleblower hotline.